Salameh determined to reduce vulnerability

Central Bank Governor projects deposit growth at about 7 percent

July 19, 2011- The level of the pubic debt is sustainable, but there’s a need to reduce the fiscal deficit and raise the economy's growth rates in order to reduce public finance vulnerabilities, said Central Bank Governor Riad Salameh in a press statement.

Salameh said the Central Bank intends to discuss with fiscal authorities the financing of the public debt from the markets, including through 7-year Treasury bonds denominated in Lebanese Lira. He said the currency market is stable with a balance between supply and demand of foreign currencies, while interest rates are also stable.

The Governor forecast bank deposits growth at between 5 and 7 percent in 2011, which he said constitutes a positive trend in light of the prevailing local, regional, and global situations.

Salameh expected private sector lending to grow by 15 percent this year, driven in part by housing loans that might increase by $1.3 billion. He said that the Central Council will study the possibility of raising the level of exemptions from reserve requirements on housing loans from 90 to 100 percent. He said, however, that there might be some imbalance between approvals and utilization of exempted reserves, as the actual usage does not exceed 63 percent of the reserves authorized for utilization. This means that banks in general still have the capacity to lend 37 percent of exempted reserve requirements or about $2 billion, despite the decline of deposits in lira and the increase in the dollarization rate.

Prime Minister Najib Mikati's cabinet renewed Salameh’s term as Central Bank Governor during its first session last week. Salameh will begin the new six-year post on August 1. This will be his fourth term as governor